Assume the following information is available for the United States and Europe:

a$.$ Does IRP hold?

IRP does not hold hat$(AA)$ in this case.

b$.$ According to PPP$,$ what is the expected spot rate of the euro in one year? Do not round intermediate calculations. Round your answer to three decimal places.

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c$.$ According to the IFE, what is the expected spot rate of the euro in one year? Do not round intermediate calculations. Round your answer to three decimal places.

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d$.$ Reconcile your answers to parts $($a$)$ and $($c$).$

Parts a and c combined say that the forward rate premium or discount is

the expected percentage appreciation or depreciation of the euro.